Why Data Migration is Critical for Digital Transformation in Financial Services
Data migration is a foundational step in digital transformation for financial institutions. By moving data from legacy systems to modern platforms, firms can unlock the full potential of advanced technologies like analytics, cloud computing and AI. This shift allows institutions to improve decision-making processes, enhance customer experiences, and stay competitive in a rapidly evolving market. Successful planning and strategy is required however to take full advantage of these value gains. Read below for a deeper understanding of how organisations can increase value and minimise risk when moving to more modern platforms.
Technology today is core to advances that can be made in every financial institution. Financial Services use technologies such as data analytics to better understand their customers and personalise offerings.
As part of a broader digital transformation agenda, global financial institutions are future-proofing their organisations by modernising their applications and infrastructure. This transformation is underscored by a major shift from on-premises to cloud-based infrastructure, solutions and services, through which data modernisation and business innovation can continue to evolve.
Business executives however, still find it difficult to overcome digital transformation challenges. Several studies have found that most organisations do not have trouble developing new ideas but still struggle to capitalise on digital transformation trends or to transform their ideas into organisational goals.
The digital native customer of today wants to access finance solutions from anywhere, at any time, and this is driving most financial services to transform their products and manifest significant enhancements in their customer service. Often, this warrants a platform migration and involves the seamless movement of customer data, product contracts data, and other financial/nonfinancial data from the source system to the target system.
Data migration is however still one of the most challenging aspects of a re-platforming program. Data is usually deeply rooted in multiple places and silos. According to a Gartner Report, over 80% of data migration projects exceed their deadline or budget (while some resulted in complete failure).
Over 80% of data migration projects exceed their deadline or budget - Gartner.
Financial services handle vast amounts of sensitive data, and migrating this data requires meticulous planning to maintain its integrity and meet regulatory standards. Strategies such as phased or parallel migration are often favoured to minimise risk while ensuring business continuity. This is particularly crucial in highly regulated environments where any misstep can result in significant legal or financial repercussions. You need to maintain data integrity, compliance, and operational continuity throughout the migration project, and there are multiple risks that have to be mitigated at every stage.
Various methods exist in a smooth data migration process. The parallel method offers the lowest level of risk because the new system is run alongside the legacy system until all the bugs are worked out and the team can ensure that business processes will run properly. The phased method however means the data is shifted in segments, with phases designated by module, volume or another designation in the system. As each segment of data is transferred, bugs can be worked out, which could make it easier to train employees on a new system.
Data migration during re-platforming is, without a doubt, a complex and challenging process. It is however achievable if you leverage the experience and skills of data migration specialists that are adept with migration accelerators, tools, and methodologies specifically tailored to the needs of the financial services world, covering both On-premise and SaaS/Cloud migration projects. A quick, secure, effective, and seamless migration can be achieved using world-class platforms with minimal disruption to daily operations while continuously refining and improving the process. It will help those in the financial services industries to stay agile.
Often, executives look at data migration as just another technology project. The industry is however slowly seeing a shift. They are now strategically aligning data migration with an organisation’s technology and digital transformation plans.
Some players that have been a part of previous transformation projects still feel somewhat anxious about digital transformation and feel the gains do not necessarily outweigh the risks. There are leaders from organisations that have modernised and now run on top of a more contemporary set of technologies which has not always resulted in a spontaneous change of their businesses. In their mind there is still work to do to complete the change required to realise the value of all of this new capability. For example, 40% of financial services companies have not yet seen any increase in performance or profitability from their investments in cyber security initiatives over the last 2 years and 43% have not yet seen any increase in performance or profitability from their investment in low-code and no-code innovation in the last 24 months.
So how does one take advantage of what's on offer and not fall into this trap? To secure greater value from all areas of technology investment, financial services companies now need to articulate or re-articulate exactly what their business goals are. Paul Henninger, Head of Connected Technology at KPMG in the UK mentions that: “We can see how these contemporary technologies work, we can understand what our strategy is going to be. There is an opportunity for excellent financial services leaders to decide what is important for how the business is going to run, and then to harness all this capability behind that strategy.”
So what are some of the areas of greatest value to be achieved?
- Forty percent of financial services companies reported greater than expected improvements in employee satisfaction, which could give them a critical advantage in the battle for talent in the financial services sector.
- Reducing costs by improving productivity without a plan to generate new value is likely to lead to job losses. Instead, technology driven increases in productivity should free up the sector’s workforce to focus on creating new value.
And what are some of the areas still to be explored or improved upon?
- Financial services companies are particularly excited about the potential of quantum computing – they now see it as a top-three technology priority for investment and understand that focusing on these will accelerate the speed at which financial services firms work, particularly as they look to harness their extensive data.
- Patching up performance gaps through intentionally targeted digital transformation.
- Leveraging productivity gains to drive value rather than just counting the cost savings.
It will be important to recognise the economic impact of digital transformation on the organisation in all respects. Ultimately, the revenue gains for organisations that become true partners to their customers will dwarf the value of cost savings.
About Digiata
Digiata offers end-to-end solutions that cover a wide spectrum of business processes conducted in financial services companies including process automation, reconciliation and complex integration, payments and reconciliation, data analytics and customer experience. Digiata works with mission-critical, high-volume transaction platforms and systems for some of the leading banks and investment managers across sub-Saharan Africa and the UK, combining market leading software with industry innovation to solve specific business challenges for its clients. Digiata provides the perfect balance between a solution customised to business challenges and environment, plus the speed of implementation and agility of a team of experts who have a powerful toolset to draw on.
References:
Batool, S. 23 August, 2024. 5 Best Practices for Successful Data Migration in Financial Services. Data Ladder. https://dataladder.com/financial-services-data-migration-best-practices/
KPMG. Tech Report. The Value of Digital Transformation in Financial Services.
https://kpmg.com/au/en/home/insights/2024/03/v
alue-of-digital-transformation-financial-services.html
Maveric Systems. June, 2023. Why do banks need to care more about data migration now? https://maveric-systems.com/news-events/why-do-banks-need-to-care-more-about-data-migration-now/
Veritas Transcend. What Technologies Enable Digital Transformation? https://www.veritis.com/blog/what-technologies-enable-digital-transformation/#:~:text=Although%20many%20digital%20transformation%20technologies,popular%20in%20the%20current%20era.
World Wide Technology. 25 May, 2023. A Cloud Migration Primer for Global Financial Institutions. https://www.wwt.com/article/a-cloud-migration-primer-for-global-financial-institutions
